CPPIB to join KKR, Stone Point Capital in merchant bank venture

TORONTO — A subsidiary of the Canada Pension Plan Investment Board is joining KKR & Co. LP and Stone Point Capital in a fledgling merchant banking business that provides capital markets services and investments for mid-market companies.

MerchCap Solutions LLC was formed in August of 2012.

CPPIB Credit Investments Inc. will commit $50-million of equity to the venture, and has earmarked up to $2-billion of capital for direct investment in middle market debt transactions and other non-traditional corporate lending opportunities arranged for clients of MerchCap (MCS), the firms said.

Mark Jenkins, the head of private debt at the Canadian pension fund, will join the board of directors of the merchant bank, as well as it strategic development and capital allocation committees.

However, the day-to-day activities will continue to be done by KKR’s capital markets employees.

“This investment is an excellent opportunity to expand CPPIB’s Private Debt portfolio into the middle market, an attractive and underserved market segment,” Mr. Jenkins said in a statement. “We also believe there are additional underserved areas that we can target by combining our focus with MCS’s structuring and distribution expertise.”

He described KKR and Stone Point as “longstanding, well-aligned partners” of CPPIB.

Craig Farr, global head of capital markets at KKR, called the Canadian pension plan’s private debt business “unique and highly differentiated.”

Mr. Farr said MCS clients “will benefit from CPPIB’s ability to scale and hold private corporate credit assets” as well as the pension fund’s “long-term orientation as a lender and investor.”